I speak to some of the Colleges of Optometry in the United States, and without fail get asked what is the advantage of owning your own practice, versus the advantages of working for someone else. My reply to this question is usually pretty long, but I’ll try to shorten it for this blog.
The obvious advantage to working for someone else is that you don’t have to worry about paying the bills, staffing the practice, marketing the practice, etc. You basically get to do the “doctor” stuff and go home. When you own the practice, you also have to deal with all of the other “business” stuff.
Advantages to owning the practice are primarily these four things:
Most commercial practices these days pay the OD a percentage of revenue produced by their patients, usually 14-16% of the net collected. As an example, if that number is 15% and the revenue produced by patients from Dr. Amblyopia is $1,000,000.00, then Dr. Amblyopia will be compensated $150,000.00. On the other hand, if Dr. Amblyopia owned the practice, the typical “target” for owners is about 31% of net revenue, so he would earn $310,000.00. More than twice the figure for an employed OD.
2. Tax advantages.
As the owner of the practice, you get to make decisions on what is “company” business and what is personal business. Many practice owners deduct car payments, cell phone payments for family members, and have family members on payroll for peripheral support positions. All are tax advantages.
When you own the practice, you get to choose when it is open, which managed care plans to accept, when to go on vacation, who to hire, which charities to support, etc.
If you own the practice, you build equity in the value of the business. When it comes time to sell, you get to reap the profits.